Following is the balance sheet for the period ending 31st March 2006 and 2007. If the current year’s net loss is Rs.38,000, calculate the cash flow from operating activities. 31st MARCH 2006 2007 Short-term loan to employees 15,000 18,000 Creditors 30,000 8,000 Provision for doubtful debts 1,200 – Bills payable 18,000 20,000 Stock in trade 15,000 13,000 Bills receivable 10,000 22,000 Prepaid expenses 800 600 Outstanding expenses 300 500 Hint: Net cash lost in operating activities (69800)
Answer : In financial accounting, operating cash flow (OCF), cash flow provided by operations or cash flow from operating activities (CFO), refers to the amount of cash a company generates from the revenues it brings in, excluding costs associated with long-term investment on capital items or investment in securities. The International Financial Reporting Standards defines operating cash flow as cash generated from operations less taxation and interest paid, investment income received and less dividends paid gives rise to operating cash flows. To calculate cash generated from operations, one must calculate cash generated from customers and cash paid to suppliers. The difference between the two reflects cash generated from operations.
CFO = -38,000 – 8,000 -1,200 – 22,000 – 600 = -69,800
So, we get net cash lost in operating activities of -69,800.
